China’s dominance in the rare-earth metals market

An introduction to rare-earth elements

Rare-earth elements (REE) are a group of 17 chemical elements known for their conductive and magnetic properties. They are cerium, dysprosium, erbium, europium, gadolinium, holmium, lanthanum, lutetium, neodymium, praseodymium, promethium, samarium, scandium, terbium, thulium, ytterbium and yttrium.

  • Key defence applications such as electronic displays, lasers, guidance systems and radar and sonar systems
  • Several of these metals are critical for the energy sector — oil refining, nuclear power and wind turbines

Current market scenario

China has always flourished in the REE market, since it has the highest resource concentration in the world. In 2019, it held a c.90% share of global REE production, leading to supply concerns among global economies. China’s market power has resulted in a very competitive global supply chain. As a result, Australia, India, Japan and the US (the Quad countries) amped up production to reduce China’s market share to 60% in 2021.

China’s dominance

The REE mine with the world’s largest deposits is the Bayan Obo deposit in Inner Mongolia, north of China; it contains 40m tons of rare-earth reserves.

  • Exploration in India is regulated by the Bureau of Mines and the Department of Atomic Energy
  • Indian government corporation IREL (India) Limited (IREL) has the monopoly over monazite beach sand — the key mineral that contains REE and is found in coastal states
  • IREL produces rare-earth oxides through low-cost, low-reward upstream processes and sells these to global companies that extract the metals and manufacture final products through high-cost, high-reward downstream processes
  • IREL’s primary focus is on supplying thorium (extracted from monazite) to the Department of Atomic Energy
  • In 2019, the US imported 80% of its rare-earth requirements from China
  • President Joe Biden signed an executive order in February 2021 to review gaps in the domestic supply chain of rare earths, medical devices, chips and other key resources
  • In March 2021, the Department of Energy announced a USD30m initiative to tap into the US’s domestic supply chain for rare earths and other battery-making minerals like cobalt and lithium
  • Australia is the fourth-largest producer of rare earths
  • Prime Minister Scott Morrison announced USD360m in funding to counter China’s dominance
  • Projects to be funded include a rare-earth separation plant, a battery material refinery and a vanadium processing plant in Western Australia
  • Japan’s rare-earth procurement is managed by Japan Oil, Gas and Metals National Corporation (JOGMEC), a state-owned company governed by the Ministry of Economy, Trade and Industry

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Acuity Knowledge Partners

Acuity Knowledge Partners

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We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/